In San Francisco, Accelerating a "Civic Technology" Industry
BY Sam Roudman | Thursday, May 16 2013
With $140 billion in federal, state, and local money going towards IT this year, investing in government technology start-ups might seem like a good idea. But Silicon Valley conventional wisdom holds that government agencies and tech startups make strange bedfellows.
“Doing what we’re doing doesn’t make sense,” says Jed Sundwall, the CEO of a start-up called Measured Voice, which helps large, generally governmental organizations like the USDA and the Department of Energy manage their social media. “More ordinary VCs, they’re like ‘smell you later- you’re not gonna make money fast enough if you do that.’”
There are plenty of reasons for an investor to avoid technology startups with a government focus. Government takes too long to make decisions, procurement processes are arcane and impenetrable, and there's plenty of money to be made elsewhere. From the perspective of a government agency, it might seem dicey to spend taxpayer money on a startup with little or no track record. What is a civic-minded entrepreneur to do?
Starting last year Code for America offered an answer with its inaugural Accelerator. Currently accepting applications for its second year, the accelerator provides mentorship for civic startups, which CfA defines as companies providing services using open government data, bringing new web technologies to government, or changing how citizens access government services.
The accelerator’s handful of startups get $25,000 and spend a week a month for four months working out of CfA headquarters in San Francisco. There, they have access to industry insiders and investors, and get crash courses in finance, marketing, and industry-specific topics like procurement and sales cycles. At the end of the accelerator, the companies get to pitch themselves at the CfA Summit, which is attended by government technology staff from across the country.
Think of it as a more focused, less intense version incubators like Silicon Valley’s Y Combinator, which takes in almost 50 startups twice a year, and shoots them out to pitch major investors after three months of full-time business development and mentorship.
A year later, CfA’s bet on government tech appears to be paying off. Ron Bouganim, the director of the Accelerator, says only one out of the seven start-ups has yet to raise some sort of funds. All of the first-year startups are still in business, they all say they are doing better business, with at least partial credit due to the accelerator. Which isn’t to say they all knew what they would be getting out of it going in.
“We didn’t know if it was a fit for us,” says Nick Bowden, CEO of MindMixer, an Omaha based platform that helps organizations communicate and engage with their constituents or customers. Bowden says MindMixer already had 200 clients coming into the accelerator, marking them as perhaps the most established company there.
Bowden expected to get help with fundraising, but instead found the accelerator was more beneficial from a “foundational product standpoint.” He says the accelerator moved MindMixer from working to strengthen the relationship between a citizen and their city or school district to “building citizen-to-citizen relationship[s]” as well. He credits the accelerator with helping MindMixer double its business in the last year. The company announced a new $1.9 million round of funding in April, and has raised over $6 million to date.
The accelerator helped other start-ups expand their client base.
“Our expertise was previously at the federal level,” says Sundwall, from Measured Voice, "but CfA helped us break in and shift towards cities.”
Kuang Chen, the founder of Captricity, a Berkeley based service which helps extract data from paper forms, agrees.
“We never touched government prior to CfA,” he says.
The company launched their product four months prior to joining the accelerator. Chen told me the one government client they can announce is the California Fair Political Practices Commission. The company has raised more than $1.6 million.
The 2012 accelerator also catered to less established ventures. Recovers makes tools that helps communities prepare and recover from disasters. Although it had $340,000 from the John S. and James L. Knight Foundation, and had launched tools in a handful of cities before the accelerator, Recovers founder and CEO Caitria O’Neill says her company was the earliest-stage startup to join the program.
O’Neill says Recovers’ challenge was “trying to figure out how to scale a company that goes door to door to cities” to sell its product. Bouganim helped Recovers refine their business model, which in addition to selling to cities, now also sells information to insurance companies. The support from CfA didn’t end with the accelerator. “We’re relying pretty heavily on CfA to help us do a round of investment in the next 6 months,” says O’Neill.
The startups benefited from the attention of well connected investors like Tim O’Reilly, but also government officials.
“I think the biggest benefit for the accelerator for us was the access to speak with innovators in mayor’s offices from around the country,” says Erine Gray, founder of Aunt Bertha, “meetings that we wouldn’t have otherwise been able to get.”
The accelerator “opened up a huge network,” says Mark Nelson, COO of Revelstone, which helps organizations like local governments track their performance. “Today I’ve got an open door for a couple dozen people.”
Nelson says Revelstone has benefited from being a part of the CfA ecosystem, which includes its fellows and its local "brigades," which are networks of volunteers in cities across the country.
According to Franklyn Chien, co-founder and CEO for 2012 accelerator start up LearnSprout, the accelerator attendees themselves form part of that network.
When his company is looking for business contacts in different states, he says, “we can call one of our accelerator pals.”
For Sundwall, taking part in the 2012 CfA accelerator provided not just business support, but mental support — apparently there's some stress that comes along with working in the nascent field of civic technology.
“One of the great things we got out of it was not feeling like we’re crazy,” he says.